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Benefits and Risks associated with SLA and Pay per device Pricing Models

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16

Jun, 2016

Google

MSP’s are always trying to deliver high quality services to their users and they do successfully complete this type of task quite often. But there are situations where it can be quite hard to figure out which is the best way to price MSPs, and that’s why here you can find some of the best monetization options as well as some tips on how you can make the most out of them.

Which are the most popular pricing options and how can they help your business?

  • Monitoring only is a very good pricing model because it delivers a stellar networking monitoring all while integrating alerting services. This particular approach can use multiple service levels. Basically, the service management will be easier because there will be a flat fee per month and any other additional services will be added in a separate manner which is very helpful. Plus, a great service level can appear in case such a thing is needed.
  • Per device pricing.This type of pricing is actually one of the best monetization options on the market and it works seamlessly. It allows you to get a flat fee for all the device type that can be found within a business. This way you can doservice management a lot faster and you will also be able to track costs more efficiently. Of course, some of the pricing ranges will differ based on the device complexity but that’s what will offer you a very good value in the end. This also helps make the entire offer a lot simpler.
  • SLA agreements. These are basically created as a contract between the service provider and the customers and it will document the services that are offered. However, the pricing model presented here can get more complex. The price will vary based on a variety of factors that vary from uptime and availability to performance benchmarks, concurrent users, help desk response time, usage statistics and schedule. All of these can impact pricing and that’s what makes SLA a more complex approach when compared to others.

Which one is the best?

Both SLA and pay per device pricing models come with their own ups and downs. For example, pay per device is easier because it removes the effort and instead it just makes the entire experience simpler and a lot more natural.The downside here is that by accessing this type of pricing you will basically be locking yourself into a commodity based pricing type. This pricing model drives the customers to choose their services in terms of pricing rather than benefits. On the other hand, SLA based pricing is more complex and it offers a better insight into the demands of your business. With MSPs being in a very high demand, you have to understand that a more complex tool is exactly what you should be looking for. SLA based pricing also features fewer risks because unlike the per-device pricing, this particular type of pricing won’t allow you to be shopped around by customers. That’s very useful to begin with and for a large company this can lead to better security and higher margins.

SLA pricing however doesn’t offer that much transparency when compared to per-device pricing models. Basically, when the price goes up one can easily see that. That’s not what you get with SLA where the process is a little more convoluted.But SLA is the way to go if your business is growing as it does offer a much better way to understand the experience in the end.

SLA based pricing is more specific and that does help with the entire monetization process. That doesn’t mean pay per device is bad, it’s just not as good and insightful for the larger companies. This is a great option for beginner companies but the larger ones need more focus on Value pricing.

Moreover, with help from SLA all the MSP’s can have a value based pricing that helps understand the prospect needs all while succumbing to their needs! Close to 40% of all MSP’s are already focusing on using an SLA based pricing scheme and this is certainly the trend of the future. It works seamlessly and it does manage to deliver an outstanding insight into the future as a whole.

If you want to determine what should be changed for SLA pricing, you have to consider things like what you manage and the risks that appear in front of the customer and the MSP. You will then have to build a gross margin of close to 50% in order to acquire efficiency.

The value based pricing practice is quite simple, you have to add in all you can in the flat fee to make the services have more value and then you have to charge extra depending on the situation.SLA pricing is more stable as you rate your services with higher margins and whenever there are any price fluctuations you can withstand it by offerings the services at standard price by reducing your margins to a limit. This will helps you to overcome the price fluctuations and deliver the value with superior customer satisfaction. This particular thing will make it very challenging for competitors to actually enter a competition with you and emerge victorious!

By : Vishal Pokala

Vishal Pokala is The Marketing Research & Strategic Manager of SURE! (a Magnaquest product). SURE! is an internationally acclaimed player in comprehensive end-to-end Subscription Business Solutions for PayTV, Broadband and Cloud Computing businesses – through deployment of Metered Billing, CRM, Service Fulfillment, Value-Added Services, and Managed Services.

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